Help me understand some math from "Invest in Debt" by Jim Napier
This is from page 98 in the book.
- Johnny owes you $10,000 -- interest rate is 10%, payment is $132.15, number of payments is 120.
- He's going to sell his house so he asks you for a discount if he pays it off now.
- You agree to satisfy the debt for $8,000, because the interest at $8,000 is now apparently 15.6%.
Can someone explain this to me? Why is this transaction beneficial to you? You just lost $2000. Why is the interest higher? I must be missing something about present value, which is a concept I'm still trying to grasp.